Home Loan Demand Falls As Rates Climb

According to the Mortgage Bankers Association’s Weekly Applications Survey, a slight increase in mortgage rates last week caused a dip in both refinance and purchase loan demand. Average mortgage rates increased across all loan categories, including 30-year fixed-rate loans with both jumbo and conforming balances, FHA-backed mortgages, and 15-year loans. Mike Fratantoni, MBA’s chief economist, said the average rate only increased a few basis points but that increase was matched by a large drop in refinance volume. In fact, the Refinance Index – which spiked 11 percent the previous week – dropped 13 percent last week. Purchase demand was also down, falling 5 percent from one week earlier. The declines brought the Market Composite Index, a measure of total mortgage loan demand, down 9.2 percent. According to Fratantoni, the interest rate increase was due, in part, to incoming economic data suggesting a pickup in the pace of growth. Still, Fratantoni said some lenders continue to report having pre-approved borrowers who have been unable to find a house because of tight inventory in certain markets. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.